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The Rise of B2B Marketplace Financing: Why Distributors Need to Embrace the Change

Leading digital platform consultant Applico has created ripples in the rapidly changing B2B marketplace scene with record-breaking fundraising figures.

In 2021 alone, the top three B2B marketplaces secured an astounding $1 billion in venture capital investments, underlining the explosive growth potential of this industry.

Applico’s deep dive into the top 50 B2B marketplaces brought to light a key revelation: a remarkable “growth hack” that could shape the future of B2B commerce.

This intriguing development involves B2B payments and net-term financing capabilities, an innovation poised to accelerate digital growth.

The Consumer Influence on B2B

The “buy now, pay later” trend, which has gained tremendous popularity in the B2C e-commerce sphere, has finally made its way to the B2B world. These cutting-edge B2B marketplaces are introducing a B2C-like checkout and financing experience, complete with simplicity, instant approvals, and flexible payment options. What’s groundbreaking is that this feature isn’t limited to small transactions; it seamlessly applies to substantial B2B deals, often worth hundreds of thousands of dollars.

Applico’s research reveals that at least 33% of the top 50 B2B marketplaces have already integrated this capability, with the number expected to exceed 50% within the next six months. What’s more, these fintech platforms handle the complex processes of payments and collections on behalf of the sellers, relieving marketplaces of the need to make substantial investments in developing their own financing capabilities.

Fintechs vs. Distributors in the Financing Game

Traditional B2B distributors have long prided themselves on offering financing as a key value proposition to their customers. Many believe they’ve adopted effective tools for this purpose from classical B2B financing software providers. However, the B2B marketplaces have found a way to enhance this offering further, and here’s the secret: they’re not doing it alone. In fact, only one of the top B2B marketplaces, Faire, has built its net-term financing capability in-house. The rest rely on third-party B2B fintech startups to provide this critical capability.

While distributors may boast about extending credit worth at least $1 million, the real appeal of fintechs lies in their ability to offer near-instant approvals, requiring only minimal buyer information.

This streamlined credit approval process, unlike the often cumbersome procedures of traditional B2B distributors, is a game-changer. Fintechs might not lend a million dollars, but they can typically extend up to a few hundred thousand dollars in mere moments – more than enough for most business customers seeking extended credit terms.

The fintechs’ seamless digital checkout experience not only mirrors consumer marketplaces but also offers offline sales teams the opportunity to provide instant credit to non-digital buyers. This level of ease and convenience is a significant advantage for both buyers and sellers.

A Win-Win Situation

For distributors, the benefits extend beyond offering a better experience to buyers. When using net-terms providers, sellers receive immediate payments, as the fintechs typically assume the risk on their own balance sheet or work with a network of lenders. This eliminates the negative cash flow impact and the need for distributors to handle the time-consuming and costly accounts receivable collections process.

In essence, the fintechs have created an end-to-end solution that transforms the B2B payment and financing experience, making it delightful and straightforward for business customers while removing the complexities from the marketplaces and distributors.

The Urgency of Adaptation

Customer behaviours in the B2B realm are shifting. As business customers become accustomed to “buy now, pay later” offerings in the consumer sector, they expect similarly seamless payment capabilities in the B2B space. Payment and net-term financing capabilities are rapidly becoming a staple feature for the top B2B marketplaces. Distributors that lag behind risk losing customers to these marketplaces in terms of service quality and overall experience.

Distributors have long prided themselves on offering top-tier service, so why should they allow marketplaces to take the lead in providing a more delightful payment and net-term financing experience? Embracing the fintech-driven changes in the B2B landscape may be the key to staying competitive and meeting the evolving expectations of B2B customers.

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